Dome Mines, Ltd. v. Commissioner

DOME MINES, LTD., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Dome Mines, Ltd. v. Commissioner Docket No. 26684. United States Board of Tax Appeals 20 B.T.A. 377; 1930 BTA LEXIS 2137; July 29, 1930, Promulgated *2137 Ferdinand Tannenbaum, Esq., for the petitioner. Bruce A. Low, Esq., for the respondent. PHILLIPS *377 The Commissioner determined a deficiency of $10,189.26 in income tax for the period from April 1, 1923, to December 31, 1923. Petitioner brings this proceeding for a redetermination of such tax, alleging that the Commissioner erred in failing to allow a deduction from income of $10,060 paid for listing its capital stock upon the New York Stock Exchange. Only a part of the deficiency is involved. FINDINGS OF FACT. The petitioner is a corporation organized under the laws of the Dominion of Canada, with its principal place of business at Toronto, Ontario, and an Office in New York City. Petitioner was organized on June 12, 1923, as the successor to the Dome Mines Co., Ltd., a corporation organized and existing under the laws of the Dominion of Canada. At the time of organization, all of the assets of the Dome Mines Co., Ltd., were transferred to petitioner in exchange for the issuance by petitioner of 1,000,000 shares of its no par value capital stock. Such stock was distributed to the stockholders of the predecessor corporation. The capital*2138 stock of the Dome Mines Co., Ltd., the predecessor corporation, was listed on the New York Stock Exchange. Subsequent to the issuance of the capital stock of petitioner, application was made to the New York Stock Exchange for the listing of the *378 1,000,000 shares of its outstanding capital stock. Thereafter and on or about November 5, 1923, such stock was listed on the New York Stock Exchange. On November 5, 1923, there was paid, as the cost of listing the issued stock of petitioner on the New York Stock Exchange, the sum of $10,060. In determining the net income of petitioner for the period from April 1, 1923, to December 31, 1923, the respondent disallowed as a deduction the said sum of $10,060. OPINION. PHILLIPS: The statute allows as a deduction in computing taxable income "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business." Petitioner's position is that the amount paid to list its capital stock upon the stock exchange is deductible. Petitioner points out that as its stock had already been issued, the expenditure can not be regarded as a part of its organization expenses. It is also contended*2139 that no benefit flows to petitioner from the listing; that any benefit accrued to the stockholders in that if afforded them a broader market for their securities. For these reasons it is said that the amount paid to secure the listing of the stock can not be treated as a capital expenditure. If the expenditure does not meet the statutory requirement, it can not be deducted, even though it may not properly be classified as a "capital expenditure." It is clear that there are expenditures which are not of a capital nature and yet do not meet the test of the statute. Assuming, as does counsel for the petitioner, that the petitioner was not benefited by this expenditure and that the listing was for the benefit of the stockholders, it seems impossible to say that the payment was an ordinary and necessary expense of carrying on the business of the petitioner, which business is stated in the application for listing to be gold mining and milling. Money expended for the sole benefit of the stockholders and from which the corporation derives no benefit is analagous to a dividend. If counsel is incorrect in his assumption, stated above, and the listing of its stock was made for the*2140 benefit of petitioner, it seems clear that the rights and benefits thereby acquired continued indefinitely and that their cost can not be deducted as an expense of the year in which payment was made. Decision will be entered for respondent.